Those who invested in Crocs (NASDAQ:CROX) five years ago are up 638%
Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. To wit, the Crocs, Inc. (NASDAQ:CROX) share price has soared 638% over five years. This just goes to show the value creation that some businesses can achieve. The last week saw the share price soften some 1.1%. We love happy stories like this one. The company should be really proud of that performance!
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Crocs
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, Crocs moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Crocs share price has gained 571% in three years. During the same period, EPS grew by 73% each year. This EPS growth is reasonably close to the 89% average annual increase in the share price (over three years, again). So you could reasonably conclude that investor sentiment towards the stock has remained pretty steady, over time. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
It's nice to see that Crocs shareholders have received a total shareholder return of 48% over the last year. However, the TSR over five years, coming in at 49% per year, is even more impressive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Crocs , and understanding them should be part of your investment process.
Crocs is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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